Exam 18: The Tax Compliance Process

F&D Inc. ceased operations and dissolved under state law in 2014. Mrs. Herron, a 20% shareholder, received a $490,300 liquidating distribution from F&D. This year, the IRS determined that F&D underpaid its 2013 and 2014 income tax by $967,100. How much of this deficiency can the IRS assess against Mrs. Herron?

Which of the following statements about the tax return filing process is false?

The fact that a taxpayer receives a refund check indicates that the IRS is satisfied with the accuracy of the taxpayer's return.

Individuals are allowed to deduct interest paid on an income tax deficiency as a miscellaneous itemized deduction.

A person can't be relieved of liability for a tax deficiency under the innocent spouse rule unless that person was forced to sign the tax return under duress.

Only one spouse must sign a jointly filed Form 1040.